206

WAR  BORROWING

trative  cost  incident  to  the  certificate  issues.  The
Treasury  balance  would  be  kept  more  uniform  or
at  least  be  saved,  barring  extraordinary  occurrence,
from  that  alternate  plethora  and  depletion  which
the  certificate  method  has  not  been  able  entirely  to
avoid.  The  interest  charge  would  be  no  greater  —
less  indeed  by  the  extent  to  which  a  lower  rate
might  continue  to  be  used  for  the  bonds  than  for
the  certificates.
As  to  the  money  market,  there  need  be  no  more
strain  or  disturbance  incident  to  an  installment  loan
than  to  certificate  borrowing.  The  stabilizing
quality,  we  have  seen,  resides  in  the  credit  mechanism ­
  offered  by  the  Federal  Reserve  Banks  and  not
in  any  peculiar  virtue  of  the  borrowing  device.
If  the  installment  quotas  should  correspond  in  volume ­
  and  interval  with  the  certificate  issues,  there
would  in  the  first  instance  be  like  requisition  upon
the  capital  supply.  The  pace  of  public  expenditure
would  be  the  same  under  the  two  systems,  and
there  would  be  like  redeposit  of  borrowed  funds  in
subscribing  banks  qualified  as  depositaries.  Beyond ­
  this,  should  the  occasion  arise,  the  stabilizing
measures  provided  by  the  Federal  Reserve  System
in  connection  with  certificate  borrowing  —  discount
and  rediscount  facilities  —  would  likewise  be
available  under  the  alternative  system.  The  need
might  be  less,  but  the  remedy  would  be  as  ready.
With  respect  to  general  well-being,  the  chief
merit  of  the  installment  bond,  as  compared  with
the  certificate  of  indebtedness,  lies  in  the  possibility
it  offers  of  effecting  our  war  borrowing  without
the  creation  of  the  huge  volume  of  additional  bank